RE: RE: Ann Mason update - Compare with HNE
Goldhunter, comparing total metals-in-ground doesn't compare the economic potential.
Hugo North has much higher grades in high tonnages in defined zones, and significant gold credits reducing net mining costs, in addition to all the capital now being expended on the mine and concentrator, meaning potential for early returns, thus much lower net present value financial discounting of the reserves.
If the high grade ore zone from the JV line is extended past the 625m N mark to the 1300m N mark with similar (or better?!) grades and tonnages along strike, I think the key comparison is what is the best 250 million tonnes of ore you can find in any deposit, since the Hugo 1 Lift will have a 25 million tonne/year capacity.
Because of economic and political uncertainty, and reversion of current high copper pricing as new mines come on stream over the next twelve years, the better comparison is probably what can be recovered within ten years after mining hopefully commences in 2012: by year 2022, what is the best 250 million tonnes you can recover?
I believe the Hugo LIft 1 block caving requires a center-out mining plan - meaning the block caves start and move in zones both north and south through the ore body, so that access and extraction is always from the edges-in as the subsidence zone expands. So if you were going to put a bullseye in the sweet spot at Hugo North for Lift 1, where would you put it?
At Hugo North Extension (JV) looking at the total resource may be misleading because the tonnages may be too high to extract within a reasonable timeframe. If the ore zone is doubled to the 1300m N mark where the last hole in 2006 was interpreted to have cut the top of the ore body, for sake of discussion say Hugo North Extension's resources double with the same grade ranges.
If half the Hugo Lift 1 block caves are aimed at removing the best Hugo North Extension ore over the first 10 years of mining (assuming the block cave will move both North and South, and the Southern arm may be on 100% IVN Hugo North), the norther arm will remove 12 million tonnes a year, or 120 million tonnes over ten years. We need to identify the best 60 million tonnes of ore to the 625m N mark - and assume it doubles to the 1300m N mark - On Feb 1, 2006 ETG put out an NR that said the best 64 million tonnes in the Hugo North Extension (at a cut-off grade of 2%) had an average grade of 2.78% cu plus 1.1 g/t au (or a combined cu. eq. grade of approx. 3.5%) - spot metal content averaging $235 per tonne contained copper and $55/tonne contained gold.
The NSR's from ore like that will be incredible if metal prices stay at today's levels ... and still incredible even if they fall over time back to $3 copper.
From 12 million tonnes/year from the JV, ETG would be entitled to 20%, or 2.4 million tonnes/year, with contained metal value of approximately $700 million - or $5.60/share per year. If new deposits, Heruga, etc.,. could produce similar results and extend that kind of revenue indefinitely at a modest 8x earnings ETG would be valued at $45/share for the JV interests alone - and if the JV was mined at a higher rate (up to double possible if more high-grade ore was discovered) then based on 25 million tonne per year production the stock could double that target.
Anne Mason doesn't come anywhere close in potential upside for high grade block caving and revenue in the next 15 years - if ever. It isn't even yet clear what has been found could be mined and processed economically. The grades are borderline, and with new mines in Zambia, the Congo, and elsewhere with much higher grades, when copper markets come into surplus it will probably be too late in any event. Maybe an economic mine can be found and built at AM, but like the NR says, feasibility studies are still way in the future.
Keep your eyes on Mongolia IMO and waste as little cash as possible in the US. Drill the 100% ground - there is 35 million tonnes/year of lower grade ore from Oyu South that could be displaced from the concentrator if ETG finds a high-grade deposit, or another one is found on the JV, or if the trigger gets pulled on a Heruga block cave. That's where the money is at. Zone III, the old Eagle anomaly west of Hugo North in the West Shivee Trend on the 100% ground, and the Eastern trend containing the X-Grid and Eastern IP trend ... drill them. Drill the intervening ground between Hugo North and Ulan Khud. Drill Sparrow and Castle Rock to the South (Heruga targets). Drill in Mongolia where capital for extraction in the short term is pouring in. Ann Mason can wait - it is just a project to keep management busy while otherwise they would be in the embarassing position of claiming big management fees for doing nothing but waiting for results and plans from IVN and RioT. But nevertheless that is where we are going to see the most certain upside. A strike on the 100% ground in Mongolia on a Hugo North or Heruga scale - this stock goes to the stars. It is already headed for the moon.
CG